Inherited SIPP options

Cardew

Having seen some excellent un-biased advice on financial matters on this forum, I wonder if any of the experts could offer some suggestions.

A close friend approaching age 60 (Miss X) is going to inherit a SIPP in excess of £250k from her younger sister who recently died. So the pension will retain its Tax free status. I understand that on her sister’s demise the shares were sold and the cash sum is currently earning less than 2% interest.

Miss X is retired, has no children or dependants and a very low income, but receives an allowance from her father. Her long-term financial future is assured in that she will receive an inheritance from her father.

She wants to use the pension as a ‘piggy bank’ take out several £thousands from time to time. i.e. some form of ‘flexi-access drawdown’.

She is not financially astute, which is why she asked me for advice – a case of the ‘Blind leading the Blind’! In the past both she and her sister have received some poor advice on pensions from advisors with a vested interest; including for the SIPP she is inheriting.

Can anyone offer suggestions, obviously with a low cost to manage when ‘dipping in’ What is the current position with cash held in that SIPP? – do any providers pay a competitive interest rate?

Thanks

DRS1

No idea about interest rates on cash but there are things called MMFs (Money Market Funds) which may give a better return than 2%.

But how long does she expect the pension to last? Should at least some of it be invested instead of just held in cash or cash like funds?

wjr4

https://forums.moneysavingexpert.com/discussion/6678638/inherited-sipp-options

where did she find those financial advisers as they should never have a vested interest?

Does she own her property? What is her overall financial situation? Her expenditure? Health?

sheramber

She is going to inherit, so the money is still within the estate at present?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82091362#Comment_82091362

It is a SIPP that is being "inherited".

Maybe there is other money in the sister's estate.

mrklaw

many providers pay around 2% for literal cash

I think at minimum I’d put the majority into a money market fund which is about as low risk as you can get but getting about double the rate of cash as platforms don’t need to be competitive on cash unlike isa and bank accounts

ali_bear

What about the incumbent provider/platform the SIPP was held in? She should be able to talk to them to discuss the options for what to do with it (in terms of where to keep it and how to manage it and access the funds).

af1963

As the sister was below 75 when she died, the pension is inherited free of income tax, so she could withdraw any amounts without tax being due.

Different providers have different charging structures. With £250k, it's likely that the lowest 'running costs' will be with one of the platforms that charges a flat rate fee.

Others above have mentioned some "cash-like" options within the SIPP. She could also withdraw (tax free) and put some into cash ISAs or just into high rate savings accounts. Depending how much her "very low income" is, there could be a fair amount of room for earning taxable interest before any tax is actually payable ( she could earn interest of roughly £18500 minus her other taxable income - made up of the unused part of her personal allowance, the starter rate, and the personal savings allowance) and she might get better rates on cash savings held outside ISAs or SIPPs.

Cardew

https://forums.moneysavingexpert.com/discussion/comment/82091336#Comment_82091336

In both cases the recommendations were from friends and I understand they turned out to not be 'independent' financial advisers. Without trying to be disrespectful to your profession, in my experience, in all walks of life, the lure of a high commission can influence advice!

I don't know full details but I believe her parents set up a trust for her and a brother. Her father is in his mid 80's.

She owns a property without a mortgage.

dunstonh

In both cases the recommendations were from friends and I understand they turned out to not be 'independent' financial advisers. Without trying to be disrespectful to your profession, in my experience, in all walks of life, the lure of a high commission can influence advice!

Commission hasn't existed since 31/12/2012, and the advisors in this section are IFAs. Not FAs. It has been said many times on this site that the general rule of thumb is not to use an FA, but to either DIY or use an IFA.

Past research showed that over half of people using an FA thought they were using an IFA. So the situation is not unusual. An FA is not going to draw any more attention than is necessary to the fact that they are not independent.

I'm not sure we can use the following definition nowadays (due to regulatory and product changes), but in the past, it was said that an FA represents their company, while an IFA represents the client.

jimjames

https://forums.moneysavingexpert.com/discussion/comment/82091336#Comment_82091336

I'm not sure you can say a financial adviser never has a vested interest. Surely an adviser for the likes of SJP has an interest in promoting their products even if there is a better option elsewhere? Certainly back in the days of commissions (which maybe is when the comment relates to) there were many advisers that had their income as their primary driver. It's different for an IFA that is working for the client but the OP didn't make that distinction.